2. a) Distinguish reserves from share capital. (5 Marks) b) The trial balance of plastics ltd as at 31 October 2004 is as follows sh000 sh000 Ordinary shares capital of sh 50 each 10,000 10% preference share of sh 100 each 9,000 105 debentures 8,000 Land and buildings (NBV) 25,000 Plant and machinery (NBV) 8,000 Motor vehicles (NBV) 2,000 Inventory 6,000 Accounts receivable and payable 20,000 19,000 Capital redemption reserve 6,000 Cash at bank 4,100 Share premium 4,000 Retained profits as at (November 2003) 3,000 Debentures interest 4,000 Preference dividends 450 Gross profit 25,000 Other operation income 4,000 Administration expenses 13,000 Distribution costs 6,000 Other operating expenses 1,550 Interim ordinary dividends paid 2,000 Corporation tax 500 Additional information a) A building whose het book value is correctly sh 5 million is to be revalued to sh 9 million b) A final ordinary dividends of sh 2 million as proposed. c) The balance of the corporation tax for the current year is estimated at sh 3 million. Required: i) Income statement for the year ended 31 October 2004. (8 Marks) ii) Balance sheet as at 31 October 2004.